Back to the future: Benetton transforms its global network

During the 1980s, everybody marveled at Benetton, the Italian casual-wear c ompany with a penchant for provocative advertising. The archetypal network organization, it used subcontractors and independent agents for production processes, distribution and retail. But recognizing that times change, Bene tton decided on a new approach - in advance of external pressures. Without giving up the strongest aspects of its networked model, it is integrating a nd centralizing, instituting direct control over key processes throughout t he supply chain. The company also is diversifying into sportswear, sports e quipment and communications. Vertical integration has meant establishing state-of-the-art production pol es in Benetton's foreign locations. The Castrette pole, near its headquarte rs, decides what each of the foreign poles should produce (on the basis of the skills and experience of the local population), and the foreign poles c ontract out production tasks. Benetton also has increased its upstream vert ical integration to exercise greater control over its supply of textiles an d thread. At the retail end, the company is supplementing its network of sm all, independently owned shops with large, directly controlled mega-stores. To stay ahead of fashion's ever-changing whims, Benetton is streamlining i ts brands and collections, supplementing two basic collections with smaller , flash collections. In its recently acquired sports businesses, Benetton has invested in high-t ech systems for designing sports equipment and has brought together designe rs from around the world for creative cross-fertilization. It has also reor ganized its production processes and improved its retail network by establi shing Benetton "corners" in the large sports shops of major distribution ch ains. In the field of communications, Benetton's Fabrica workshop has produced aw ard-winning films, and its new company, United Web, hopes to take advantage of the possibilities of e-commerce. Benetton knows that innovative businesses must pay attention to how knowled ge is divided among producers, suppliers and retailers. Its new directions represent a major discontinuity from its past and divergence from industry practices.